McKinnon Wallace Holdings Pty Ltd v Commissioner of State Revenue [1998] VSCA 59

32. Mr. Nettle Q.C. appeared with Mr. Boaden for the Commissioner on this appeal, and Mr. Shaw Q.C. with Mr. P. Fox for McKinnon Wallace and, as might have been expected, the argument before us about the nature of the rights arising on the sale of an equitable interest in land was highly sophisticated. Thus, focussing on the words "becomes an asset of the trust" in s.64A(3)(b), Mr. Shaw developed an argument that, because the subject matter of the contract of sale was itself an equitable interest in property, completion of the contract meant, not that the vendor became trustee for the purchaser of the vendor's interest in the property, but that that interest was effectively disposed of by the vendor to the purchaser. Upon the sale being completed, in the ordinary course the vendor does become constructive trustee for the purchaser of the subject matter of the sale; but where the subject matter is equitable property, the vendor becomes, in substance, a "middle man" whose very existence (the argument ran) can be ignored. Thus, where A holds the legal estate and B the beneficial interest, if B becomes bare trustee for C of the beneficial interest, A thereafter holds the legal estate in trust for C and there is no need to notice further the existence of B. So much, Mr. Shaw submitted, was established in Oughtred v. Inland Revenue Commissioners [1959] UKHL 3; [1960] A.C. 206, particularly in the speech of Lord Radcliffe; see also In re Holt's Settlement [1969] 1 Ch. 100 at 106 per Megarry, J. and Neville v. Wilson [1997] Ch. 144 at 157.

35. A great number of cases and writings were canvassed in argument by the one side or the other, and I mention Head v. Lord Teynhan (1783) 1 Cox Eq. Cas. 57; 29 E.R. 1061, Grainge v. Wilberforce (1889) 5 T.L.R. 436 at 437, In re Lashmar, Moody v. Penfold [1891] 1 Ch. 258 at 267, 270, Redman v. Permanent Trustee Co. of N.S.W. [1916] HCA 47; (1916) 22 C.L.R. 84 at 93-97, Chang v. Registrar of Titles [1976] HCA 1; (1976) 137 C.L.R. 177 at 181, 184-5, Corin v. Patton [1990] HCA 12; (1990) 169 CLR 540 at 578-579; Battersby, "Formalities for the Disposition of Equitable Interests Under a Trust" (1979) 43 The Conveyancer and Property Lawyer 17, Snell's Principles of Equity, (28th ed., 1982), p.104, Jacobs, Law of Trusts in Australia (6th ed., 1997) para [2312] and Pettit, Equity and the Law of Trusts (6th ed., 1989) p.73. Many of these Mr. Nettle sought to distinguish as bearing only upon the position when equitable property is assigned with immediate dispositive effect. He emphasised the requirements of s.53(1)(c) of the Property Law Act which, he said, required writing before any disposition of an equitable interest could be effective. Counsel did not dispute that if the vendor of an equitable interest in land were to complete the sale of that interest the vendor would cease to have any interest in the property and would cease to be constructive trustee thereof for the purchaser; rather he submitted that such a sale could be completed only by transfer in writing, which the parties had expressly foregone. Upon completion of the contract of sale in this instance McKinnon Wallace became constructive trustee of its beneficial interest in the land for the purchaser, which was notably different, he submitted, from the vendor's assigning that interest to the purchaser. If a vendor disposes of what he owns, he no longer holds it; but if the vendor becomes trustee of what he owns, he retains it albeit on trust for another. Mr. Nettle, too, relied upon Lord Radcliffe's speech in Oughtred.

(1990) 169 CLR 540